Engineering and construction deals insights: Midyear 2020

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The first six months of 2020 showed an overall decrease in deal value versus the first six months of 2019, with 1H 2020 deal value totaling $41 billion compared to $45 billion in 1H 2019.

Deal value decreased from $33 billion in Q1 2020 to $8 billion in Q2 2020, and total deal value in Q2 2020 was the lowest in the last eight quarters. Total M&A transaction values and volumes have been decreasing over the last two calendar years and the global COVID-19 pandemic, decreasing oil prices and geopolitical tensions contributed to continued contraction of M&A transactions within the sector during 1H 2020. While significant challenges exist, cross-border M&A transaction value represented 58% of total transaction value in 1H 2020 compared to 42% in 1H 2019.

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“M&A activity in Q2 2020 was the lowest in the past eight quarters with low oil prices and COVID-19 representing the most significant challenges. As a result, we expect 2020 to end as a fourth consecutive year of decreasing M&A value. However, there will be opportunities to fuel a recovery within select segments.”

- Eric Cullers, US Engineering and Construction Deals Leader

High level trends and highlights

  •  The Engineering & Construction sector has experienced a decline in deals volume and value in first half of 2020.
  • Total deal value in H1 2020 amounted to $40.7 billion, a decrease by 10% as compared to H1 2019. A similar trend was noticed for deal volume in H1 2020, registering 1,017 deals compared to 1,221 deals in H1 2019, a 17% decline.
  • The deal value in Q2 2020 was the lowest it has been in eight quarters. This could be attributed to US trade sanctions and the COVID-19 pandemic.
  • The top 10 deals totaled up to $26.7 billion, accounting for 66% of the total deal value in H1 2020.

  • The Engineering & Construction sector experienced a decline in deal value and volume across all sub-sectors except construction machinery, which witnessed a stark increase in value led by the acquisition of Thyssenkrupp AG-Elevator Technology Business Germany by Thyssenkrupp AG-Elevator Technology Business UK.
  • Construction machinery exhibited the highest deal value and lowest volume in H1 2020, accounting for 52% of the total deal value. Two of the top ten deals in H1 2020 belong to this sub-sector.
  • The Construction sector suffered the most, with a 55% decline in deal value and 9% decline in volume in H1 2020 over H1 2019. Construction materials manufacturing and home building each saw a similar decline in H1 2020. 

  • Cross-border deals provided the majority of  H1 2020 deal value. They contributed 58% of deal value but only 19% of deal volume in H1 2020. Three out of the top ten deals in H1 2020 were cross-border transactions.
  • Within-border deals made up 81% of deal volume and 42% of deal value in H1 2020. The majority of the deal values were smaller, leading to a lower contribution in overall deal value.

  • UK and Eurozone dominated H1 2020 deal value. The region was the most active acquirer with 60% share in terms of deal value and contributed to 16% of the deal volume.
  • Asia and Oceania exhibited the second highest contribution of deal value with deals around $11.3 billion (39% of deal volume).
  • Africa and South America were notably low in H1 2020, both in terms of deal value and volume.



Engineering and construction sub-sector analysis

Construction machinery contributed the highest to the sector in terms of deal value in H1 2020, driven by Thyssenkrupp’s elevator technology business of UK  acquiring its counterpart in Germany.

Civil engineering experienced a decline in both transaction value and volume. The sub-sector accounted for 6.6% of the total deal value in H1 2020, driven by three of the top ten deals.

Construction went through a decline of 55% and 9% in terms of deal value and deal volume, respectively, in H1 2020 from H1 2019. Four of the top ten deals in H1 2020 were from the construction sub-sector.

Construction materials manufacturing sub-sector witnessed a decline of 57% and 28% in deal value and volume, respectively, in H1 2020 compared to H1 2019. This sub-sector included the acquisition of Emami Cement’s deal by Nuvoco Vistas for $773 million.

Home building experienced a decline of 30% in deal value accompanied with a 4% decline in volume in H1 2020 compared to H1 2019.


Financial vs. strategic investors

Financial investors contributed 60% and 35% share of total deal value and volume, respectively, in H1 2020 as compared to the contribution of 35% and 32% in H1 2019. Strategic investors remained active in the sector consistent with contribution to the volume of deals and represented 40% of total deal value in H1 2020 compared to 65% in H1 2019. Strategic investors account for eight of the top ten deals in H1 2020.


Engineering and construction deals outlook

With continued sector challenges and the overlay of the COVID-19 pandemic, M&A activity will decrease compared to previous years. The current macro-economic environment and recent societal changes including the reversal of urbanization trends will pose unique challenges in many end markets and will increase strains on the sector, which will lead to increasing concerns around liquidity and may limit potential M&A market participants. However, opportunities will exist in discrete end markets with increased focus on potential acquisition targets that offer technological advancements within the sector and/or are well positioned to disrupt the market. In addition, with record levels of available capital, private equity may increase their presence in the sector seeking value creation opportunities.

About the data

The information presented in this report is an analysis of deals in the global E&C industry. Deal information was sourced from Thomson Reuters and includes deals for which targets have an SIC code that falls into one of 60 E&C industry groups. Certain adjustments have been made to the information to exclude transactions which are not specific to E&C or incorporate relevant transactions that were omitted from the SIC industry codes.

This analysis includes all individual mergers, acquisitions, and divestitures for disclosed or undisclosed values, leveraged buyouts, privatizations, minority stake purchases, and acquisitions of remaining interest announced between July 1, 2017 and June 30, 2020, with a deal status of completed, partially completed, pending, pending regulatory and pending completion, and excludes all rumors and seeking buyers. Additionally, transactions that are spin-offs through distribution to existing shareholders are included.

Percentages and values are rounded to the nearest whole number which may result in minor differences when summing totals.

Contact us

Eric Cullers

Engineering and Construction Deals Leader, PwC US

Michael Sobolewski

Engineering and Construction Industry Leader, PwC US

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